“The next rally in gold, when the Fed finally acts, is going to be huge”

“Gold bulls feel tortured after nine months of correction,” is how Bill Fleckenstein described the current mindset of many gold investors.
In his most recent weekly column for MSN Money, Fleckenstein provided his view on the latest developments in the gold market and his outlook going forward.
“Turning to the gold market, obviously it has been under pressure, too,” Fleckenstein noted. “I’m sure many folks were disappointed Thursday to see…combined with all the other stimulus we’ve seen, not only not make gold rally but see it decline. Unfortunately, that is just where we are right now. The minute ‘good news’ for gold doesn’t work, it turns into bad news, because it didn’t cause the market to rally.”

He went on to say that “One of the problems the gold market has had is that demand from India has been subdued. The finance minister there has been trying to clamp down on gold purchases, and of course India’s currency has been quite weak. That minister has now resigned, so we may see Indian behavior begin to revert back to what it has been. If so, we will be approaching the strong seasonal period for gold in another month, with potentially pent-up demand.”

Fleckenstein added that “At some point, though, I continue to believe that more American investors will start buying gold, though I have no idea what the catalyst will be…But in my opinion, given all I have described above, the next rally in gold, when the Fed finally acts, is going to be huge. Thus, I think gold investors need to be mentally prepared for what they might do if that is the case.”
He subsequently concluded by asserting that “Anyone with gold exposure probably doesn’t need to take that much action until it looks like the powers that be are finally panicking. But when that moment arrives, gold bulls should make sure they have the positions they want, so they can capture attractive (even if a little higher) prices, rather than paying up after the market has rallied a long way and exposing themselves to more risk.”

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